I was just doing a round of gauntlet, and it ended in a defeat screen, but it shouldn't have? I was using split screen to do something else, but I did look over at the gauntlet screen to watch the end of the battle. One of my companions had been totally defeated, but my other four fighters were at full health. There's a possibility it timed out, but I don't think it did.
My team composition was jocol and kit in the front row, and crested snowloon, kit, and abyssal thrasher in the back row. The thrasher was the one that got defeated.